Here’s why your credit score matters amid COVID-19

In the midst of the COVID-19 pandemic, liquidity and access to capital have become critical challenges for many entrepreneurs. With only 11 percent of African adults having a credit history, the question arises - can this data be beneficial in the current economic climate? CNBC Africa recently spoke with Ted Martynov, the CEO and Co-Founder of Credit Marketplace Karma (CARMA), to delve deeper into the importance of credit scores. Martynov emphasized the significance of access to information both pre and post-COVID era. He noted that while fraud was a major concern before, the current issue lies in over-indebtedness. By tapping into data from various industries such as retail, utilities, and digital services, CARMA aims to aggregate this information to aid lenders in making more informed credit decisions. Martynov shed light on the low percentage of African adults with credit histories, attributing this to the limited banking penetration on the continent. However, he expressed optimism in CARMA's approach, which goes beyond traditional bank data for credit assessment. By incorporating diverse data sources, CARMA aims to boost financial inclusion and improve credit assessment processes. He highlighted the potential impact of CARMA's services in Sub-Saharan Africa, particularly in helping struggling lending organizations post-COVID crisis with better credit decisions. The conversation also touched upon the challenges faced by financial institutions in lending due to a lack of credit history. Martynov emphasized the need for seamless data sharing among banks, mobile money institutions, and digital lenders to enhance credit assessment processes. Despite the concerns about challenges in rolling out the innovative technology by CARMA, Martynov expressed confidence in the quick adoption of the service in Africa due to the technological advancements and the availability of mobile money and digital services. As CARMA initiates its services in Sub-Saharan Africa, the vision of facilitating data sharing for improved credit assessment processes looks promising not only for the region but also as a potential model for other regions internationally. Although Martynov refrained from making concrete predictions, he highlighted the rapid pace at which similar initiatives were embraced in Eastern Europe years ago, suggesting a quicker uptake in Africa due to technological advancements. In conclusion, Martynov acknowledged the challenges ahead in introducing a revolutionary technology that upholds peer-to-peer data sharing. Despite facing obstacles in reaching out to new companies, progress has been made with the engagement of credit unions in Zambia. With the promise of making the data sharing process more efficient and immediate, CARMA stands as a beacon of hope for enhancing credit assessment practices in a rapidly evolving financial landscape.